Cheat Sheet: IPTV

IPTV. Is this another new TV channel on my digibox?No. IPTV stands for internet protocol television - or TV through your broadband connection rather than through an aerial or cable. It's more likely IPTV will be something to challenge your current TV set-up.

But I've got a TV card on my PC now.So you can watch some television, true, but this is set to be far more expansive. The idea is that IPTV will be a step beyond cable with almost infinite potential in terms of channels and interactivity as well as premium on-demand content.

When you say "premium-on demand content", are you basically saying it's going to be more sport and movies? Sounds uncannily like Sky's launch strategy back in the day, doesn't it? Which, let's face it, pretty much worked. In order to make people switch there will have to be the availability of premium content, such as sport.

But the option for niche broadcasting is also far greater. Something which can support an audience of several thousand viewers may never have enjoyed prime-time, mainstream appeal but some company out there may well see IPTV as the opportunity to develop that revenue stream and serve a market previously untapped and not provided for.

By 'niche' do you mean smut?Not particularly. It goes without saying the seamier side of home entertainment will remain on top of new developments but really 'niche' could be anything from local news broadcasting to minority sports coverage.

Will people really go for this?Over time IPTV will be another offering alongside satellite or digital over the airwaves to an aerial or dish receiver. It will certainly be a third, very credible alternative, if not dominant.

Surely there will always be people who just want four or five channels through their old aerial.It won't always be an option. The UK government will have switched off the analogue signal by 2012 – which is how those bog-standard five channels are received now – and, in order to keep watching, we will all have to be receiving digital television by then.

As such, many people will continue using satellite or cable but it's likely the provision of IPTV - by the likes of BT which launches a service later this year - will also be used as a way to offer premium television content and a broadband connection to those yet to switch over to one or the other.

So what are the set-up costs? And will it prove tricky?The set-up costs are going to have to be competitive with the alternatives I've already mentioned. And with convergence of voice, data and video, it's likely a triple-play offering of television, phone and internet will at least streamline some existing expenditure for many consumers yet to sign up for such services from a cable provider.

As for how tough it will be, this is one for the service providers and manufacturers. They have to win consumers over so they need to make it as close to people's current experience of television and as close to plug and play as possible. They have to win the living room and they have to come up with an attractive form factor because people aren't going to gather around a PC in the study to watch the World Cup final.

Are there going to be special televisions then?It's certain that people will come up with set-ups to appeal - most likely a box and screen configuration. And as more people see iTunes et al as the future of their home music and media collection, it's likely there will be some degree of consolidating television, video, DVD, movie library, stereo, music library into one device.

Beyond seamless set-up and the provision of must-watch content, what other hurdles must be overcome to make this happen?There's still a way to go. Broadcasters, distributors and rights owners must be on side, though it seems the successes of services such as iTunes have shown paid-for content is a far more preferable revenue stream than trying to recoup funds from illegal services.

What's in it for them?Advertising revenues are falling in the television world, while they are still increasing online. That suggests broadcasters will be looking to create a greater online presence. The broadcast ad model is also taking a further hit from services such as Tivo, which enable viewers to skip ads, and recent figures that suggest key demographics (teens) are more interested in the internet than television. As such it seems the time to modernise is upon us.

Makes sense. Any other hurdles?Well there is the small matter of the technology of course. If you lose sound and picture just as a penalty is awarded with five minutes to go in the World Cup final, and England are on the brink of glory (it might happen), you're not going to be best pleased.

Similarly, with consumers already looking towards the benefits of high-definition television (HDTV), bandwidth may still be an issue. If IPTV is to come in alongside HDTV then users will need at least 10Mbps connections. Standard IPTV meanwhile will require around 1.5Mbps per channel.

It's not quite ready yet then?There are around 300 schemes of various sizes currently in development around the world, with the UK near the forefront, so it looks like it's just a matter of time. However, don't bin your Freeview box or rip down your satellite dish just yet.